BII
This story was delivered to BI Intelligence "Payments Briefing" subscribers. To learn more and subscribe, please click here.
Mastercard expanded Masterpass, its digital payment service, so that consumers can now make payments both online and offline.
The expansion could ultimately kickstart mobile wallet adoption among a new subset of users.
Customers can now use Masterpass on three types of channels.
Online: Masterpass is offered as a buy button on a variety of e-commerce websites in order to simplify purchasing.
In-store: Users will now be able to make in-store NFC-based payments at compatible terminals via Masterpass. Users can pay with Masterpass at over 5 million merchant locations in 77 countries, according to the firm. It’s worth noting that the service is HCE-based, which means that contactless functionality will only be available to users with Android phones because of the way Apple limits developer access to its NFC chip.
On phone: The platform will also be integrated into a variety of innovative app-based use cases, including Bluetooth-based vending machine payments, table payments at the Cheesecake Factory, and Facebook Messenger chatbot payments with JetBlue.
The service is offered directly through the customer’s issuing bank, which makes it convenient and accessible. Rather than being offered through a separate app, Masterpass is API-based, which means that partner banks have the ability to integrate it directly into their existing apps or build companion apps. And major banks, including Bank of America, Citi, and Capital One, have partnered with Masterpass, which means that 80 million customers will have their card information directly integrated with the wallet, according to the card network.
The firm hopes that simple Masterpass integration will make it easy for banks to move from mobile banking to mobile payments, Mastercard Chief Innovation Officer Garry Lyons said at an event Thursday. It’s possible that users whose banks aren’t yet partnered with Masterpass will be able to access the wallet through a separate application.
Masterpass' issuer-driven strategy could help the wallet complement rather than compete with other players in the space.
Tech-savvy early adopters who are highly interested in digital payments have likely already adopted a competitor product, like Apple Pay or Android Pay, Mastercard EVP of Digital Payment Products James Anderson told BI Intelligence. Mastercard isn't highly focused on grabbing these consumers. Rather, the product is targeting regular consumers who are loyal to their bank and concerned about safety and security, according to Anderson. That could be a big population — 75% of users trust their bank more than any other firm to provide a mobile wallet, according to ING.
Onboarding these users could help grow the entire wallet ecosystem. Pushing a consumer-facing product into the hands of previous nonusers could help Mastercard grow its brand awareness. But by giving mobile payments to a new population of users, the firm is also increasing the general population's familiarity with mobile wallets. That could drive up consumer demand, which in turn might drive more merchants to begin accepting mobile payments, and as a result, grow adoption overall.
Mobile payments are becoming more popular, but they still face some high barriers, such as consumers' continued loyalty to traditional payment methods and fragmented acceptance among merchants. But as loyalty programs are integrated and more consumers rely on their mobile wallets for other features like in-app payments, adoption and usage will surge over the next few years.
Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on mobile payments that forecasts the growth of in-store mobile payments in the U.S., analyzes the performance of major mobile wallets like Apple Pay, Android Pay, and Samsung Pay, and addresses the barriers holding mobile payments back as well as the benefits that will propel adoption.
Here are some key takeaways from the report:
In our latest US in-store mobile payments forecast, we find that volume will reach $75 billion this year. We expect volume to pick up significantly by 2020, reaching $503 billion. This reflects a compound annual growth rate (CAGR) of 80% between 2015 and 2020.
Consumer interest is the primary barrier to mobile payments adoption. Surveys indicate that the issue is less the mobile wallet itself and more that people remain loyal to traditional payment methods and show little enthusiasm for picking up new habits.
Integrated loyalty programs and other add-on features will be key to mobile wallets taking off. Consumers are showing interest in wallets with integrated loyalty programs. Other potential add-ons, like in-app, in-browser, and P2P payments, will also start fueling adoption. This strategy has been proved successful in China with platforms like WeChat and Alipay.
In full, the report:
Forecasts the growth of US in-store mobile payments volume and users through 2020.
Measures mobile wallet user engagement by forecasting mobile payments' share of their annual retail spending.
Reviews the performance of major mobile wallets like Apple Pay and Samsung Pay.
Addresses the key barriers that are preventing mobile in-store payments from taking off.
Identifies the growth drivers that will ultimately carve a path for mainstream adoption.
To get your copy of this invaluable guide, choose one of these options:
Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
Purchase the report and download it immediately from our research store. >> BUY THE REPORT
The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of how mobile payments are rapidly evolving.